Khalif v Khalif & Anor [2022] HCATrans 68 (13 April 2022)

Last Updated: 20 April 2022

[2022] HCATrans 068

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S154 of 2021

B e t w e e n -

KHALIF

Applicant

and

KHALIF

First Respondent

KHALIF

Second Respondent

Application for special leave to appeal

KIEFEL CJ
GORDON J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA AND BY VIDEO CONNECTION

ON WEDNESDAY, 13 APRIL 2022, AT 11.30 AM

Copyright in the High Court of Australia

KIEFEL CJ: In accordance with the protocol for remote hearings, I will announce the appearances of the parties.

MR B.W. WALKER, SC appears with MR P.D. LANGE and MS E.L. BARTLEY for the applicant. (instructed by Aquila Lawyers)

MR D.F. JACKSON, QC appears with MR A.G. TODD and MR G.D. McDONALD for the first respondent. (instructed by Jordan Djundja Lawyers)

KIEFEL CJ: There is no appearance for the second respondent. Yes, Mr Walker.

MR WALKER: Your Honours, we need an extension of time.

KIEFEL CJ: Is there any objection?

MR JACKSON: That is a matter for the Court, your Honours.

KIEFEL CJ: Yes. Is the extension dealt with in the affidavit material?

MR WALKER: Yes, your Honour.

KIEFEL CJ: Yes, there will be an extension.

MR WALKER: May it please the Court.

KIEFEL CJ: Thank you.

MR WALKER: May I now come to a substantive barrier of very considerable moment? None of the arguments, which are jurisdictional in nature, that are sought to be presented were special leave to be granted, reflected to the slightest degree in the way matters were argued at first instance and on appeal and my learned friends could not have overstated that in their submissions and they ‑ ‑ ‑

GORDON J: Do you accept what is put at page 122 in paragraphs 1 and 2?

MR WALKER: I think it follows that.....yes, unequivocally, there could be no qualification to any of those observations. They are, with respect, appropriate, both as to a matter of fairness and effective advocacy to be placed to the forefront of our learned friend’s written argument, and I hope I have recognised that force by coming to it immediately.

So, without attempting in any way to mitigate the fact and the frequent forensic consequence of that being the history between the parties, can I seek to justify why, given the importance of the issues and the nature of the controversy particular to the parties, nonetheless the Court should grant special leave to appeal? On any view of it, the merits of the particular segment of the overall dispute between more than two parties concerned the extent to which, at a relevant time, the bankrupt husband held beneficially title to land held legally, 100 per cent, by our client.

Now, the time does not matter. This is not a case that raises anything even academically interesting concerning institutional or remedial trusts. But as a remedial trust imposed after full understanding of the facts concerning incremental contributions supposedly to purchase price and maintenance and the like over a considerable period of time, one imagines that this is, in terms of the Bankruptcy Act, after‑acquired property which vests therefore upon the beneficial title being.....by the imposition of the constructive trust.

Obviously enough, the interests of the Official Trustee of the subsisting bankruptcy were affected by the creation of after‑acquired property which would vest by the imposition of the trust in the trustee, and yet the trustee obviously was not involved in that argument.

GORDON J: Mr Walker, can I ask two questions about that position. Do you not have to meet section 59A of the Bankruptcy Act and, second, do you not also have to meet, as I understand the reasons and the application, that the trustee was on notice and did not seek to be joined because of, I assume, section 59A of the Bankruptcy Act?

MR WALKER: Yes, and yes. As to 59A, that requires identification of an order under Part VIII. Be it assumed that section 79 or section 78 might do that, they are not, in our submission, orders which - those are the orders sought in this case, which was to declare the effect at general law on the conscience of my client, by reason of dealings between him and his brother, resulting in the imposition of a constructive trust. That, in our submission, does not amount to an order under Part VIII because, in our submission, there is no alteration under section 79 which is thereby affected and the declaration ‑ ‑ ‑

GORDON J: But is that not covered, though, by section 78 being a declaration of interests or title rights, if any, that a party has in respect of property?

MR WALKER: In our submission, that declaration of interest does not take effect as a matter which subjects 58 and 59, particularly 58, to any particular outcome under Part VIII of the Family Law Act. By that declaration, the operation of section 58’s vesting is in fact triggered, not obviated. By that declaration the property became after‑acquired property. It need hardly be said that there was no contention on either side permitting that matter to have been further explored. So that is why 59A, picking up section 78 of the Family Law Act, does not avail to provide for the propriety of what occurred.

The next matter of course is this. What is plainly contemplated under section 90AE in relation to the alteration of what would be the bankruptcy regime is, pursuant to section 79(10), the importance, under paragraph (b), of a person such as the Official Trustee whose interests would be affected by the making of an order under section 79 altering property interests because the order under section 78 does not do that. Under section 79(12), a condition is imposed – is premised, namely that the:

bankruptcy trustee is a party to property settlement proceedings –

and then, of course, that picks up the anterior and fundamental requirements of section 90AE that you find starting at application book 113, where, under subsection (3), to take, for example, most obviously paragraph (c) on page 114, the requirement as a prerequisite of the power being exercised to accord procedural fairness. It is stipulated, and, as we have pointed out, it is not simply the trustee in bankruptcy, but also the mortgagee whose interest was demonstrated who would be thus affected.

None of that was done. So, in our submission, the multi‑step process is not one which can be rehabilitated as to its, I regret to say, glaring problems of jurisdiction by pointing to its commencement in a section 78 order under Part VIII. It is for those reasons, in our submission, that there are fundamentally important questions where there are interests – we are not altruists in this application, but we point to them to give substance to the jurisdictional problem, being the interests of the mortgagee and the interests of whoever has hopes to share in the divisible estate of the bankrupt which, in our submission ‑ ‑ ‑

KIEFEL CJ: Mr Walker, the matter relating to the constructive trust was originally part of the section 79 proceedings brought, is that correct, and it was hived off in the sense that it was ordered to be tried separately?

MR WALKER: Yes. When your Honour says, “part of the section 79”, yes, it is part of the overall matter in which section 79 would be the ultimately dispositive provision, that is, an order under section 79 would alter the property interests as between the spouses. Section 78 was necessary in order, in using the idiomatic jargon, to increase the pool because, as we have noted, one of the striking features of this controversy was that for reasons that may be obvious but are nonetheless with a clear outcome, that the husband disclaiming that he had any – I am sorry, the husband was disclaiming that he had any equity.

Now, that would be a matter between him and the Official Trustee, one might imagine and, as you know, the Official Trustee has, prima facie, a monopoly on making submissions concerning such matters when they are in the sights of somebody under section 79.

GORDON J: The difficulty with that submission, Mr Walker – the difficulty about that is - is the respondent right to contend at application book 124 at paragraph 3, that:

the trustee in bankruptcy was at all times served and kept up to date . . . with the trustee stating it had no intention to intervene or be joined . . . at that stage.

In other words, as you took us to in 79(12), it gives the trustee a right to, in effect, make submissions in respect to property the subject of the bankruptcy, whether it is after‑acquired property or otherwise. But if they do not, he says – he or she says – I am sorry, I am not going to intervene, I am going to leave it to the parties to fight it out.

MR WALKER: The short answer again is yes. It is an opportunity to be heard. It is not actually taking advantage of that, is the critical matter for procedural fairness, and I accept that.

KIEFEL CJ: Is not the effect of what is stated in paragraph 3 that the trustee is bound by the declaration later made?

MR WALKER: Yes, your Honour. I could not be heard to the contrary of that. But, as your Honours have seen, those are not matters that comprehensively cover everything that was done supposedly pursuant to section 78 in the first place because under section 78 it would be, in our submission, not possible in relation to the bankruptcy to be talking about existing property, coupled with what we submit is the integral fact in relation to existing property, that the husband was not claiming the benefit of any such equity, that is, was resisting being found to be anyone’s cestui que trust.

It is for those reasons, in our submission, that there are, notwithstanding the striking and very important matters with which our friend’s written submissions commence – and which include what is found in our learned friend’s paragraph 3, that there are nonetheless fundamental issues of the exercise of judicial power, unfortunately not addressed at all below – no thanks, we accept, to us.

This is a case which, in our submission, attracts the exceptional exercise of a discretion for the sake of good order in the exercise of judicial power. This is not good order in terms of mere procedure. This is good order in terms of basally crucial matters summed up in the word “jurisdiction”. May it please your Honours.

KIEFEL CJ: Yes, Mr Jackson.

MR JACKSON: Thank you, your Honours. Your Honours, may I deal first with the question of the bankruptcy trustee, then go on to the mortgagee. So far as the bankruptcy trustee is concerned, the husband had been made bankrupt at the time when the application was made to the Family Court. That attracted the operation of section 79(11) of the Family Law Act which your Honours will see at page 112. But as you will see from it, subsection (11)(c) requires the bankruptcy trustee to apply to the court to be joined.

As is apparent from paragraph 1 at page 8 of the application book, it was clear we were seeking orders under section 79. Section 79(11)(a) thus came into play but, as is apparent from the affidavit of Mr Jordan, which your Honours will see at page 136, the trustee was in fact kept informed throughout the whole proceedings and has elected not to participate. Could I refer your Honours also to page 68 in the Appeal Division to paragraph 5 of what is there said.

Your Honours, could I just say that if one is looking at things as a matter of policy, it is not necessarily good policy to require a trustee to be joined on every occasion of there being a bankrupt or insolvent spouse. An insolvent estate would then be burdened by the costs flowing from such an order.

Could I just say, your Honours, that when an order is made under section 79 - no order has yet been made under section 79 - it has precedence over the vesting provisions of the Bankruptcy Act, which your Honours will see from section 58 of that Act and also section 59A at pages 105 to 106.

Your Honours, could I just say also that the second basis on which it is put that section 78 was inapplicable is that there appears to be a contention that the position of a third party, that is, not a party to the marriage, as is the case of the applicant, cannot be considered in proceedings under section 78. That is, with respect, a somewhat dated or historical view in the sense that it seems to reflect an earlier form of the legislation.

Could I take your Honours to page 126 and, as we have said in paragraph 11 of the response, the legislative history of section 78, in particular the repeal of section 78(3), itself referred to in footnote 16 on that page, makes it manifest that section 78 envisages the making of orders against persons not parties to the marriage, such as the appellant.

The second thing we would say, again in paragraph 11 of our response, is that the proceedings were to declare the rights that a party, being the husband, had in respect of the property. In those circumstances, why were not the proceedings, to go to the language of section 78, in terms of section 78(1) with respect to existing rights in respect of property and, secondly, why were they not proceedings where in terms of section 78(2) the court could make consequential orders to give effect to the declaration. That is the direct operation of section 78.

May I turn then to the non-joinder of the mortgagee. The applicant’s application, at page 102 at paragraphs 36 to 42, places considerable reliance upon the fact that the mortgagee has not yet been made a party to the proceedings. But that is, with respect, to misapprehend the nature of the proceedings with which the courts below have been concerned. There are proceedings, but not yet determined, for orders under section 79.

Could I refer your Honours to the observations by the Appeal Division at page 67 in paragraph 1 of its reasons where, your Honours – I will not read it out, of course – but your Honours will see the conclusion in the last sentence of the paragraph. These are the proceedings to determine what was the property.

But, your Honours, an order under section 79 has not yet been made binding the mortgagee. The occasion has not yet arisen for the matters under section 90(AE)(3) and (4) to be taken into account. It may well be that the mortgagee does not accede to the terms of the orders that were made. But, if that happens, then a situation has to – a situation which arises is that the mortgagee would have to be joined in the section 79 proceedings.

Your Honours, the fact that that order has not been made was adverted to by the primary judge who had to deal with an application by the applicant for a stay pending the resolution of the application to the court. We have given your Honours a copy of the case. I only want to refer to two paragraphs of it; it is Kalache v Kalache (No 2) 2021 – your Honours, if I can give the brief reference – No 308, paragraphs 51 to 52.

Your Honours will see what the primary judge says, but in particular, he says no order has yet been made against the husband’s trustee, nor as against the husband’s brother’s bank. So, the situation which would be required by section 90, et cetera, just has not yet arisen.

Your Honours, may I deal briefly with a number of other matters that are raised by my learned friend’s argument. The application contends in paragraph 33 at page 101 that he does not want the equitable interest he has been held to have. That contention, your Honours, encounters a number of difficulties. One, and one of some considerable significance, is that the notion seems entirely at odds with the policy of the Family Law Act and may I in that regard take your Honours to section 79(4) at page 108.

What your Honours will see set out in subsection (4)(a) and (4)(b) are various matters to be taken into account. May we put it hypothetically how, consistently with the concepts underlying (4)(a) and (4)(b), can a party just throw up his hands in relation to a former spouse, for example, and say, “I don’t want this property”? It cannot be taken into account in section 79 proceedings. Further, the idea that there has to be assent seems to gain no support, rather the opposite, from the observations of Justice Edelman in the very recent case Commission of Taxation v Carter [2022] HCA 10.

Your Honours, our learned friend’s argument seeks to say also that the orders were made in the exercise of accrued jurisdiction and that the primary judge had erred. In one paragraph it uses the term “associated jurisdiction”. The reality is, in our submission, that the court had jurisdiction directly under section 78. If the source of the jurisdiction was in aid of section 79, then section 78 seeks to be truly part of associated jurisdiction, itself a federal provision. If the source of the jurisdiction was accrued, why is it not accrued in both sections 78 and 79?

Your Honours, this is a case - speaking a little more generally about it, this is a case where the primary judge’s findings as to facts - the conversations lying at the core of the matter, for example, on credibility were not attacked below. Can I take your Honours to the summation by the Full Court of the applicant’s and the husband’s evidence which appears at page 71 in paragraphs 17 going on to 18, and “damning findings” you will see at the start. We would add, your Honours, the specific evidence to the acceptance of the wife’s evidence at paragraphs 19 to 21 on page 72 and we would add to her conduct, really bizarre if the applicant’s case was accepted, which is referred to in paragraphs 24 to 26 at page 73.

Your Honours, the arguments in support of the application in this Court are distinguished, at least so far as this Court is concerned, by their novelty and special leave, in our submission, should not be granted. Those are our submissions.

KIEFEL CJ: Thank you, Mr Jackson. Anything in reply, Mr Walker?

MR WALKER: No, your Honour, issue is joined.

KIEFEL CJ: Thank you. The Court will adjourn to consider the course that it will take.

AT 11.56 AM SHORT ADJOURNMENT

UPON RESUMING AT 12.00 PM:

KIEFEL CJ: We see no reason to doubt the conclusion reached by the Full Court of the Family Court. The matters sought now to be raised on appeal were not raised below. The interests of justice do not require the grant of special leave.

Special leave is refused with costs.

MR WALKER: If it please the Court.

KIEFEL CJ: The Court will now adjourn.

AT 12.00 PM THE MATTER WAS CONCLUDED